Amazon Tablet

It’s something of an open secret that Amazon is working on an Android tablet and I am 99% certain they are having Samsung build one for them. Does the world really need yet another tablet? If it were anyone else, I’d say no, but I think Amazon is uniquely positioned to layer in a set of products and services that would differentiate its tablet from the flood of Android tablets hitting the market this year.

Let’s start with a critical question about this tablet: What version of Android will it run? I think there’s an assumption that any Amazon tablet will run Android 3.0, Google’s tablet-specific version of the OS. However, given Google’s recent moves to tighten how OEMs can use Honeycomb, this might not be so likely. In fact, it’s entirely possible that Amazon’s tablet, like the NOOK Color, will use Android as a base upon which to build a totally customized experience that tightly integrates Amazon services. That integration would let Amazon charge a lot less for its tablet than it would otherwise. The reason Barnes & Noble has been able to price the NOOK Color so aggressively ($250 versus $350 to $450 for comparably-sized and spec’d Android tablets) is because they’re assuming you’re going to buy a bunch of books from them over the course of owning it.

Amazon will make a similar assumption, except that they won’t just be selling you Kindle books, they’d also use the tablet as a platform for selling music (see that cloud locker they just rolled out?), video (you can bet Amazon Instant Video will be a big part of this), and apps from the Android app store they just launched (which is the biggest indication of all that they’ve got something in the works). You probably wouldn’t have something as open as a regular Android tablet (at least not without hacking it), but I think most users would accept the trade-off if it meant a much lower price of entry. And besides, Amazon will probably have a big enough library of apps by launch to help ease the pain of living in a walled garden.

Amazon understands what’s at stake, and while they aren’t a consumer electronics company, they have shown with the Kindle that they can produce a great product and then expertly tie that product into a content platform. I’m not sure I can stress how non-trivial an accomplishment this is, especially for a company that’s mainly known as a retailer. There are full-fledged consumer electronics companies that still haven’t figured this stuff out.

If they’re smart, they’ll be aggressive here and price the tablet at no more than $250. They just don’t need to achieve pricing parity with the NOOK Color (since that’ll probably be what a lot of people compare it to), they need to come out swinging with a price point that’ll draw a strong contrast with the iPad’s $500 point-of-entry. A retail price of $199 would be better still. That’d be really aggressive, but Amazon just introduced a new discounted Kindle that shaves $25 of the price if you’re willing to look at “special offers” on your homescreen, so it’s not as inconceivable as it once might have been. (One caveat: this is all assuming it’s a 7-inch tablet, it’d be a lot harder for Amazon to sell a 10-inch tablet for $200 or $250, though they could perhaps come in between $300 and $400.)

The other wild card Amazon has to play is its Amazon Prime program, where you pay $80 a year and get free two-day shipping on most products and end up spending way more money at Amazon than you would otherwise (I speak from personal experience here, I once had a ladder overnighted to me). There have been rumors in the past that Amazon was going to offer a free Kindle to every Prime member, and while it’s hard to see them just handing out $250 or $300 tablets, there might be some services on the tablet that are free for Prime members. They do already offer Amazon Instant Video to members for free, offering that same access via a tablet might be enough to convince a lot of Prime members to buy an Amazon tablet (they just need to expand the library first).

When will it launch? I don’t know, but I’d guess it won’t be too long, probably no later than this summer (the Kindle 3 launched last August). Whenever it is, I’ll be surprised if they don’t come out with something substantially different than all the other Android tablets out there. They have all the pieces in place, now we wait to see what they do with them.

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